Dividend tax calculator 2026/27
Calculate the tax on dividends received in 2026/27. Enter your salary (if any) and total dividends to see the dividend tax due after the £500 dividend allowance.
Set to 0 if you have no employment income.
Dividend tax due
£2,581
Net dividends after tax: £27,419
Dividend tax rates 2026/27
Dividends are taxed separately from employment income, using the dividend tax rates set by HMRC. The first £500 of dividend income each tax year is covered by the dividend allowance and is tax-free. Above this, the rate depends on which income tax band your total income falls into:
| Tax band | Applies when total income is | Dividend tax rate |
|---|---|---|
| Basic rate | Up to £50,270 | 8.75% |
| Higher rate | £50,271 to £125,140 | 33.75% |
| Additional rate | Over £125,140 | 39.35% |
Dividends are treated as the "top slice" of income. If your salary already takes you to the top of the basic rate band (£50,270), your dividends will start being taxed at the higher rate of 33.75% (after the £500 allowance).
The dividend allowance
The dividend allowance for 2026/27 is £500. This means you can receive the first £500 of dividends each tax year completely free of dividend tax, regardless of whether you pay basic, higher, or additional rate income tax.
The allowance has been cut substantially in recent years — it was £5,000 in 2017/18 and fell to £500 from April 2023. This has significantly increased the tax bills of many company directors and investors who rely on dividend income.
Optimal salary and dividend mix for company directors
Many limited company directors take a low salary combined with dividends to minimise their combined tax and National Insurance burden. The typical approach for 2026/27 is:
- Salary at the secondary threshold (£5,000) — avoids employer NI entirely but does not qualify for a National Insurance contribution year towards the State Pension. Not usually recommended.
- Salary at the primary threshold (£12,570) — no income tax or employee NI, but employer NI of 15% is payable on the amount above £5,000. This still qualifies as a contribution year. Employer NI is often offset by the Employment Allowance for eligible companies.
- Remaining profit extracted as dividends — taxed at dividend rates (8.75% for basic rate), which are lower than the combined income tax + NI on salary.
The optimal split depends on your company's specific situation, corporation tax liability, and whether you can claim the Employment Allowance. Always take advice from an accountant for your personal circumstances.
Frequently asked questions
How do I pay dividend tax?
Dividend tax is paid through Self Assessment. You report dividend income on your annual Self Assessment tax return and pay any tax due by 31 January following the end of the tax year. If you receive dividends from shares held in a Stocks and Shares ISA, those dividends are exempt from dividend tax and do not need to be reported.
Are dividends subject to National Insurance?
No. Dividends are not subject to National Insurance contributions — this is one of the key tax advantages of taking income as dividends rather than salary. However, it also means dividends do not count as qualifying income towards your State Pension.
What is the difference between the dividend allowance and the personal allowance?
The personal allowance (£12,570) covers all types of income including salary and dividends. The dividend allowance (£500) is an additional relief that applies only to dividends — but dividends within the allowance still count as income for the purpose of determining which tax band your other income falls into.
Do dividends count towards my pension annual allowance?
No. Pension contributions are based on "relevant UK earnings", which means employed or self-employed earnings. Dividend income does not count as relevant earnings, so you cannot use dividends as the basis for pension contributions beyond your salary income.